What an FP&A team does all year: the planning calendar

The situation

Farida starts as an analyst at Crescent Holding in Dubai. On her first morning Adham, the FP&A manager, stands in front of a wall calendar and says that this is the team's year. She asks the obvious question: so are we accountants?

It is a fair question, because FP&A and accounting both work with the same ledgers and the same reports. The difference is not the numbers. It is the question each team answers, and when it answers it. This article gives you the year on one page, so you can say what the team does in every month.

The explanation

FP&A stands for financial planning and analysis. Its year has four rhythms.

Every month: the management report. After accounting closes the books, FP&A puts the actual result next to the budget and tells management where the company stands against the plan. Many teams aim to deliver it in the first two weeks of the following month, while a decision can still change something.

Every quarter: the forecast. A forecast takes the actuals to date and projects the rest of the year using the latest information. It is not a guess, and it does not replace the budget. The budget stays fixed as the reference; the forecast moves with reality.

Once a year, often in the second quarter: the strategic plan. This looks three to five years ahead and sets the big targets.

Once a year, often in the fourth quarter: the budget. The budget turns the plan into one year of numbers. FP&A builds it with the managers of each company, driver by driver (trips, price, cost), and the board approves it before the year starts.

Across all four rhythms, FP&A does three jobs: it plans, it explains and it advises. Plan means setting the budget and forecast. Explain means saying, in numbers, where a gap between actual and plan came from. Advise means telling management what to do about it. The third job is what separates an analyst who lines up numbers from a partner whom managers listen to.

The neighbours matter too. Accounting records what happened, closes the books and hands over correct actuals; without them there is no report and no forecast. Treasury, led at Crescent by Karim, turns the forecast into cash: will the money be enough, or is funding needed? The boundary with accounting is not a wall, it is a hand-over. All three teams must work from one version of the numbers, not three.

The IFRS Foundation describes its Conceptual Framework as the basis that guides standard setting and helps preparers choose accounting policies where no Standard applies. That is the accounting side of the hand-over: actuals prepared to a common standard. What FP&A adds is the forward view.

Worked example

Palm Gate Logistics, September, in AED thousand. The budget assumed 3,200 trips at AED 1.5 thousand revenue each. The actual was 3,000 trips at the same price. Variable cost per trip was budgeted at 0.90 and came in at 0.95 because diesel cost more.

The monthly report shows EBITDA of 1,200 in the budget and 930 in the actual, a gap of 270, or 22.5% below plan. That is step one, what happened. A line-by-line comment would say revenue down 300 and cost of sales better by 30. Both are true, and both mislead.

Step two is to explain by cause. Each trip leaves 0.60 after variable cost (1.50 less 0.90). Losing 200 trips costs 120. Diesel added 0.05 to each of 3,000 trips, which costs 150. Together they explain the whole 270.

The apparent saving in cost of sales is the same story: fewer trips saved 180 and diesel took back 150, leaving 30. Cost per trip rose, so the line looked good for the wrong reason.

Step three is to advise. If September repeats, the quarter delivers 2,790 against a budget of 3,600, a shortfall of 810. A fuel surcharge of AED 50 a trip, where contracts allow, recovers 150 a month, or 450 a quarter, so the forecast becomes 3,240. The remaining 360 is volume, a question for operations. The decision is management's; FP&A proposes it with numbers.

The common mistake

The most common belief among new analysts is that FP&A is accounting with charts. It leads to the habit shown above: describing each line of the report instead of naming what moved the number. Accounting answers what happened. FP&A answers why it happened, what will happen next and what to do. If your comment only repeats the table, you have done accounting's job and skipped your own.

A second slip is treating the budget as something to update every time reality changes. Keep the budget as the fixed reference and let the forecast carry the new view.

Checklist

I can name the four rhythms: monthly report, quarterly forecast, strategic plan, budget.
My report reaches management in the first two weeks of the next month.
The budget stays fixed; the forecast is updated each quarter.
Every gap is explained by a cause with a number, not by a line.
Every explanation ends with a proposed action and an owner.
I know what accounting hands me and what I hand to treasury.
Everyone works from one version of the numbers.

Go further

Watch the full episode FPA-E1 What FP&A does all year and work through the lesson FPA-E1 What FP&A does all year, which includes the free twelve-month planning calendar template. Fill it in for your own company, all twelve months.

Companies and figures in this article are fictional. Masar-Fintech is independent and not affiliated with any professional body or tax authority.